If Congress Calls It a Tax and It's Enforced Like a Tax…


In my column today, I note that the Senate Finance Committee's health care bill calls the penalty for failing to buy medical insurance an "excise tax." A.P. points out that the House health care bill calls its penalty a "tax on individuals without acceptable health care coverage." A.P. also quotes experts who note that the method of collecting the money reinforces the language used by Congress:

"If you put something in the Internal Revenue Code, and you tell the IRS to collect it, I think that's a tax," said Clint Stretch, head of the tax policy group for Deloitte, a major accounting firm. "If you don't pay, the person who's going to come and get it is going to be from the IRS."…

"The fact that it is imposed on people and they have no choice in paying it, and the fact that it's administered through the tax system all make it look like a tax," [Roberton] Williams [of the Tax Policy Center] said.

President Obama, loath to admit he has forsaken his "firm pledge" not to raise taxes on middle-income Americans, nevertheless insists these financial penalties are not taxes:

The White House on Monday reiterated that it doesn't view the fee as a tax. Officials said Americans are already paying as much as $1,000 a year in higher medical costs to subsidize caring for the uninsured, and would save money if lawmakers pass the health overhaul. They noted that lower-income people would get federal help to buy insurance and avoid the penalty.

"People would be required to get health insurance, just as they are required to have auto insurance or to send their children to school," said White House spokeswoman Linda Douglass. "A fee would only be imposed on those few who could afford to purchase insurance, but refuse to do so."

These points seem irrelevant to the issue the White House is ostensibly addressing. First, the requirement to buy insurance can itself be fairly described as a tax: a state-compelled payment of money in exchange for a state-subsidized benefit. (According to A.P., the Tax Policy Center's Williams "sees no distinction between the requirement to get coverage and the fines themselves.") Second, the fact that you can avoid a tax by changing your behavior does not mean it is not a tax. You don't pay gasoline taxes if you don't buy gasoline, you don't pay property taxes if you don't own real estate, and you don't pay income taxes if you don't earn income. Does that mean these are not taxes either? 

It's fun to watch Obama squirm as he tries to avoid admitting that his campaign promise is null and void. But that's not the only reason to take an interest in this issue. If these penalties are not taxes, what they hell are they? Civil penalties? Criminal fines? Either of those alternatives would make collecting them more complicated and provide the people subject to them with more opportunity to resist. Which is presumably why Congress decided to call them taxes.